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With Scott Orn

A Startup Podcast by Kruze Consulting

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Scott Orn

Scott Orn, CFA

Charly Kevers, CFO of Carta, which helps private and public companies, investors, and employees manage equity and ownership

Posted on: 04/27/2021

Charly Kevers

Charly Kevers

CFO - Carta

Charly Kevers of Carta - Podcast Summary

Charly Kevers, CFO of Carta stops by the Founders & Friends podcast to tell us more on how Carta creates more owners - by helping private and public companies, investors, and employees manage equity and ownership.

Charly Kevers of Carta - Podcast Transcript

Scott: Hey, it’s Scott Orn at Kruze Consulting, and welcome to another episode of Founders and Friends. And before we start the podcast, let’s give a quick shout out to Rippling. Rippling is the new, cool payroll tool that we see a lot of startups using. Rippling is great for your traditional HR and payroll, they integrate very nicely. But guess what? They did another thing. They integrate into your IT infrastructure. They make it really easy for when you hire someone to spin up all the web services and their computer, which sounds like not a huge deal, but actually we did the study at Kruze. We spend $420 on average, just getting a new employee’s computer up and running, and their web servers up and running. It’s actually a really good deal, saves a lot of money. And the dogs are eating the dogwood. We see a lot of startups coming in to Kruze now using Rippling. So please check out Rippling. Great service, we love it. I think we have a podcast with Parker Conrad. You can hear it from his own words, but we’re seeing them take market share, so shout out to Rippling. And now to another awesome podcast at Kruze Consulting’s Founders and Friends. Thanks.
Singer: (singing) So when your troubles are mounting in tax or accounting, you go to Kruze Founders and Friends. It’s Kruze Consulting. Founders and Friends with your host, Scotty Orn.
Scott: Welcome to Founders and Friends podcast with Scott Orn at Kruze Consulting. My very special guest today is Charly Kevers of Carta. Welcome Charly.
Charly: Thank you. Thanks for having me.
Scott: Oh, my pleasure. We’ve been a partner of Carta’s for many, many years, and we’re excited to have you on. And you do a lot for the Kruze clients, so I’m excited to have you tell the story. But maybe you could just start off by retracing your own career a little bit and tell us how you landed at Carta.
Charly: Yeah, it’s a complicated story, but I’ll do it quickly. So, I’m not a typical finance guy. I started my career in consulting in Europe. Happened to support a lot of private equity funds doing … So, I actually early on got a bit of exposure to equity, and transactions and investments, so I found that really interesting. After business school, decided to go somewhere else and do strategy work in Asia. So, spent a couple of years in Korea for Samsung. Completely different type of environment, which was just super interesting. And then came to the US in 2007 to join an investment bank with JP Morgan in the Bay area to support the M&A team there. So, did that for not super long, did that for a year and then realized, “I’m just going to go to a company.” I don’t know if you’ve heard the recent stories about investment banking hours. It was about that bad.
Scott: Yeah, well [crosstalk] I was also a JP Morgan-
Charly: That’s right, you are H&Q. That’s right.
Scott: Yeah, so probably some of the folks you worked with at JP Morgan M&A are the same people I worked for. And by the way, it was a great group of people, it was just the hours, you can’t get around the hours in investment banking. It’s just how it is.
Charly: No, it’s rough. I learned a ton. I love the people, learn a ton, still keep in touch with many people from there, but it was rough. So transitioned to go to M&A at a tech company, at the time, HP. I know it’s a bit older school now, but it was a great learning ground in terms of, how does a big company do this, and really learning. Start to connected more to the operational aspects of the business, and how do you integrate it? How do you think about the financials? And just really learning a ton on that front. And it was, as much as it’s not growing as fast as other software companies, you could see it was a really well-run company. And I got to do a lot of different transactions there, international, US, a lot of different things. So, did that for a few years. And also spent two years in investor relations in IR at HP, where, it was also during an interesting time. It was when HP had … I don’t know what you remember when Mark Hurd just left, and then we had four CEOs in two years. That’s when I did IR.
Scott: That’s tough. That’s a [crosstalk] tough story to tell.
Charly: Yeah, it wasn’t fun, but talk about learning, is learned a lot on how to handle investors and talking to the Fidelity’s of the world. But that was a really interesting experience. Was not planning to do that at all. It’s one of those where I was working with all of senior people there and learned a ton. And one of them said, “You know, if you’re interested in finance, you’ve got to do IR. This is something very few people do. Go spend some time there. You’ll learn a ton, you’ll understand how investors think and get you closer to a lot of the executives and better understand how they think.”
Scott: And you’re right, the investors ask so many smart questions, and you learn the hedge funds, versus the mutual funds, versus what everyone cares about. I’m sure it makes things a lot tighter internally. You know what you’re managing to when you’re running a finance organization.
Charly: You’re 100% right. And I think that’s something I didn’t appreciate at all until doing the work is that the finance team would come to me saying, “What do you think? What are the questions you’re getting? How should we think about it? What metrics matter?” And it doesn’t mean you necessarily run the business exactly that way, but that input is so critical, and it’s still the same for even private companies, but just appreciating that input is fascinating. And to your point, they ask really smart questions. I had a lot of fun. I got to deal with really smart people. It was really, really cool.
Scott: That’s excellent.
Charly: So, I did want to go through something that was moving a little faster, so I ended up going back to M&A and doing that at Salesforce. Nobody introduced me to Salesforce. That was back in 2012 I think I went there, so still pretty early. And I joined the CorpDev team, that at the time was the same team to an M&A and investment. So now they have a massive investment portfolio. They’re invested in all the good SaaS companies out there. That was really my introduction to cap tables, and equity and what is the private markets look like? Because we were doing one investment a week when I was there. It was just a crazy pace, and they were doing several acquisitions a year as well. So, a lot of dealing with like, what’s the ownership structure of all these companies we’re dealing with? That’s really what started to give me a lot more appreciation for cap tables at the time, mostly in Excel, mostly coming from law firms. And I had several deals. I had one investment deal and an M&A deal that almost blew up because the cap table was wrong. One at the last minute, we found a mistake, all the flow of funds had to be redone. It was like a complete disaster, but that really made me appreciate like, why is this still so manual? So, they didn’t do a whole lot with it, but that really stuck with me. After Salesforce wanted to refocus my career a bit more on finance, I went to LendingClub. It was also a good opportunity for me to get into at the same time because I’m really interested in a lot of the infrastructure around us. So LendingClub for a couple of years. It’s fascinating because I’ve not spent a ton of time in financial services outside of investment banking. So this was really, personal loans, a completely new kind of approach to how you fund these loans and marketplace. A lot of interesting topics, and I was focused mostly on new products. So for example, when I was there, we launched an auto product. I was part of the team that was launching that from the finance standpoint, and understand all the implications. So really fascinating to understand all the compliance and risk aspects of a business like that. And then happened to get an introduced to Henry who was looking for a finance person at the time. And very quickly what he was saying that he was solving, I was like, “Oh my God, I know exactly what you’re talking about. Just stop there, I get it. How could we work together?” And of course, he had already had done a way bigger vision than just digitizing equity, but it quickly brought me back to my days at Salesforce and say, “I get it.” So that’s how I got to join Carta four years ago.
Scott: Totally. That’s amazing. What a great journey, and you’ve been at Carta for over four years, I think.
Charly: Yep.
Scott: So, you’ve also seen the company go from like a startup to a late stage, someday going to go public kind of company. That’s its own journey right there.
Charly: It’s fascinating. That’s also one reason I wanted to go make the jump to a smaller company. Carta, at that time, was by far the smallest company I’d ever joined, given the size companies I’ve worked with historically. It was, I think, 150 employees when I joined. We’re close to 1,000, so a ton of change. And it’s been really [crosstalk]-
Scott: Wow, unbelievable, unbelievable. Well I remember when I first saw Carta … By the way, before we turned on the cameras and the recording, we have a bunch of friends in common at Salesforce and LendingClub, so we’ve been living dual lives here, but I still remember when the first time I saw Carta or eShares at the time. And I was actually a venture capital fund too. And someone sent us, it was actually … Oh my God, I’m blanking on the name, but it’s a company doing really, really well. They sent us a digital certificate from eShares, and I was like, “What is this?” So again, I was like you where I had always wondered. The law firm controlled the cap table and controlled the Excel. And I get why the law firm controlled it because they’re issuing options, and things like that and safekeeping. But I still remember every time something needed to get changed on the cap table, it was $1,000, like blink of an eye, at least. Because the lawyer’s billable rates were so high and they did it manually. So, when I joined Vanessa Kruze six years ago, we were starting to promote Carta, because we saw that like, “Oh my gosh, the startups can actually save a ton of time and money using the cap table management tool.” So, we’ve been pretty big proponents from day one, because it just makes everyone’s life so much.
Charly: Yeah, it was fascinating for me to dig into the product early on and realizing, “Oh my God, it’s completely replacing all these processes I thought were just manual.” And nobody questioned that, and there was no tool to solve that. And stepping into finance role in terms of overseeing all the operations, we obviously leverage the platform very, very aggressively, and it’s been so helpful.
Scott: Yeah. I think most people listening to this know what cap table software is and cap table management software, but maybe just give like the 30 second or one-minute, what Carta does, how it makes your life easier, so folks who are new startup people who are listening to this, they’ll just know how it works.
Charly: Yeah, absolutely. I think the simplest way to think about us is, our system helps founders and companies as they grow, just manage the full life cycle of equity. Meaning all the way from issuing equity, to their employees, their investors and that whole process. And then the whole life cycle is what does it mean to have equity, to enable employees to interact with it, have visibility, exercise their options, and all of that process? And that’s completely automated on our platform. Then all the finance implications of it, like the compliance around all the tax docs that need to go to employees and the company. Of course, expense accounting, and really every step of maturity, having the tools to be able to make the right decisions around equity. So, all the scenario modeling when you raise a round. We recently did something specifically for safes, and that’s one of the, as I’m sure really well, super tricky, like really understanding the long-term impact of the dilution there. It’s all about putting all the right tools in the hands of founders and folks who don’t think about equity all the time. We’re making sure that whenever it matters, it’s available, it’s easy to access, the information is there and you can make [inaudible].
Scott: You’re right about the easy access and having the tools right there. And even for us, who’s advising. We have like 400 and something clients now. It makes our life so much easier as their accountant or advisor, because we can get in there, we have access too for tax filings. We can pull all the information for like when … Because we’re often times talking them through their next fundraise, and talking about the dilution, and looking at the term sheet and being like, “Well, 10 on 40, that’s pretty good. You’re giving up 20% of the company.” But making it crystal clear with real data is really, really powerful. So, you guys, you’ve done a great job. We were joking before we turned the camera on that I still remember when Henry was emailing us and calling us six years ago when I joined Vanessa. He was so passionate, the early team was so passionate, and it made just so much sense for everyone. So, it’s been really gratifying to see … I mean, do you have some stats on Carta, like how many customers you have and how big are you guys now?
Charly: Yeah, we’ve got over 18,000 companies. I think the way I like to think about it-
Scott: Wow.
Charly: Yeah, it’s a lot. Just managing from a finance standpoint has been fun. What’s been fascinating for me is just to look at what’s been the penetration in the private market, specifically venture backed? That’s our core business today. Our estimate is we’re around 35% of venture backed companies run on Carta. And that to me has been fascinating because now we’ve got a lot of data that we can hopefully start to feed back to those companies to make better decisions, benchmarking, those types of things that can be really helpful.
Scott: I’d say 90 to 95% of the Kruze clients run on you, because as part of our onboarding, we actually talk about Carta and talk to the companies about getting it. So, our client base tends to be kind of the future. It’s still a huge opportunity with even 18,000. You probably can double that in the next three or four years, which will be really exciting.
Charly: Absolutely.
Scott: For those who don’t know, any venture capitalists or seed fund, folks that are listening to this, you actually have like a fund business too. You want to talk about that just briefly?
Charly: Yeah, absolutely. Yeah, so and the quick history is, because we’ve accumulated all this information on portfolio companies, we’re in a unique position to then help the funds better manage their portfolio and report on their own performance. So yeah, a couple of years ago, almost three now, we launched the fund administration business, which effectively running the back office for funds. Was similar to what we did for private companies, we started really thinking about early stage for new managers, and how can we automate a lot of the work for them? So very similar. How do you implement running a find on a platform like Carta, which means formation should be super easy? Subscription docs should be completely online and easy for LPs to deal with. Completely rethinking how that reporting gets done too. And of course, it all is powered by the permission already being on our platform. And a lot of it is, how do you build that central source of truth for everybody in the ecosystem? And that’s been really the focus.
Scott: Well you worked at Salesforce. You guys are the Salesforce of the cap table, and fund documenting, all that stuff. It’s like the source of truth.
Charly: That’s exactly how I describe to all my friends at Salesforce. Like think Salesforce for the customer where that’s for equity. It’s exactly that.
Scott: Yeah, it’s amazing. And by the way, I have a bunch of friends who are CFOs or operations at funds, and they speak glowingly of the Carter product too, so you guys are doing well out there. Hey, it’s Scott Orn at Kruze Consulting. And before we get back to the podcast, quick shout out to ChartHop. ChartHop is one of my favorite new SaaS tools on the market. And basically, what ChartHop does, is it puts your org chart in the cloud. And I always like to say, it brings transparency to your organization. So, everyone in your organization can see who they report to, they can see the full org chart of the company and how their group relates to other groups. It also has a lot of information on the individuals in the company. So, you can click on the ChartHop profile and just get where people live, their experience, Slack handles all this kind of stuff. And it’s just a really great tool. The other thing is, ChartHop has started doing some cool stuff around compensation and budgeting planning. So, you can actually start seeing what the cost structure of the company looks like during certain scenarios. So, I’m loving ChartHop. Check it out, charthop.com. We use it at Kruze, really like it. And I can’t recommend it enough. All right, back to the podcast. Maybe let’s spend some time talking about CartaX, because this is a pretty big announcement that came out, I think like last month. Do you want to explain to the audience what CartaX is and what you’re enabling?
Charly: Yeah, absolutely. So, with CartaX, is it effectively, think of it as a listing venue for private companies. So, it’s kind of like an exchange that supports trading private stock. So, think of it as an evolution of how do we deal with liquidity in the private markets. As I’m sure you know, Scott, it’s a bit of the Wild West out there on how secondaries and liquidity generally happens. Most of the time, it’s not at the advantage of the employee, because there’s so much opacity, it’s very high friction, it’s expensive, all these things. So, what we wanted to do is, once again, we’ve got all these companies on. We have their employees that already have accounts on Carta and have all the information needed. And in many cases, we have a lot of the investors already on the platform as well. So, everybody’s there. And now how do you put all these people together that want to transact anyway? How do we provide a more transparent, simpler and lower friction process to manage liquidity? Because the need is there. It’s just liquidity happens anyway, and so how do we bring that, frankly, into the light, and put the company back in control? Because a lot of what you see happening is, funds … And I get calls every week, “Charly, you want to sell some Carta shares?” That still happens. Employees getting pinged left and rights. I can’t tell you the number of CFOs I talk to like, “Can you please help me? I’m tired of dealing with these one-off requests.” I get it, the employees see an opportunity, but administrative burden on the companies is insane, especially in this environment. It’s a lot of movements, and so that’s the underlying impetus behind it. What we also wanted is provide a platform that drives real price discovery. So, it’s really a market-driven price setting mechanism. We ran a transaction and it was really like, “Hey, here are all the buyers, here are all the sellers. And based on what the demand and the supply is, what’s the market price?”
Scott: I love the concept so much, and we’ll go through all the things you’re talking about. But for folks that don’t know, if you’re an employee, you’re typically subject to like a writer first refusal or something like that, where the venture capitalist can actually decide to buy your shares or not before you sell it. So that’s part of the friction. And then if you do get the okay to sell it, you’re probably selling it to like a marketplace or someone whose sole goal is to buy it as cheaply as possible from you, so they can sell it for as much as possible to the investors and make the spread. So, it’s like old school stock brokerage almost. There’s like a spread.
Charly: It’s exactly that.
Scott: And you also, I think your point about combining all this for the price discovery is a really good one, because if one employee is selling something to one exchange, that employee doesn’t know what … Another person doesn’t know what that employee sold. So, there’s no communication on the side of the sellers. The central exchange is going to know what’s going on. So that’s why I think it’s so exciting is, you’re actually creating almost like the ability to do a tender offer and let people piggyback on the bulk sale. And you’ve worked in way more capital market stuff than I have, but I remember from my Hambrecht & Quist days, that the big funds want to transact in volume because that’s what makes it worthwhile to them, so you get a better price that way. So, aggregating all this stock to sell actually is super helpful to the rank and file employees who are selling a little bit of it.
Charly: Absolutely. For us, it was great to see employees getting the best price possible. What’s interesting, and even if you think about tenders, which has been historically the process people have used to move secondary shares, even that tends to be a negotiated process. So, we’ve done tenders before we had CartaX, and effectively, either on the back end of a primary and there’s some connection to the primary, or I or Henry would negotiate a deal with an investor, and then we would open it up to employees. The employee doesn’t have a choice. It’s like, “This is the price, take it or leave it.
Scott: One price, yeah.
Charly: And by the way, you don’t even know when it’s going to happen next. So, a lot of the process for the employee of making a decision is hard. It’s like, “Hey, I’m thinking about buying a house. I’d love to get some money out. Do I do it now? I’m not quite ready yet. I want to do it next year.” But you don’t know. And the main thing we’re enabling is, at the discretion of the company is, you can run these as often as you want. So, we’re going to run these quarterly. I was talking to a company yesterday who wants to do it monthly, and others want to do every six months. Depending on what you see the demand is you can scale it so that your employees know. And then in between specific options effectively are what’s happening, between those options, you can tell people like, “No need to go chase for a deal, because we’re going to have predictable timelines for that.” And then we accumulate exactly to everyone, we accumulate all the demand and the supply, and that’s what’s going to drive the best price.
Scott: It’s beautiful. It’s really cool. The other thing you talked about, which I love and I agree with is, all the investors are on it too. I invest in some, do some angel investing. So, I’ve got all my angel investing stuff on there through all the companies. So, for me, if I try to buy a secondary from some other source right now, it’d be very confusing, and I’ve even investigated a couple of times. Like, “How do I buy Stripe or something like that?” And it’s like the fact that as an investor, I can just log into the portal and see it and make it actionable for me is adding a ton of value. Because candidly, I’ll just usually forget or get distracted and not ever chase that down. And now it’s going to be brought to me, like in a self-serve way, I think is really, really exciting.
Charly: Yeah, long-term. You’re exactly right, Scott. I think long-term, that’s the other piece we’re trying to solve is if you look at who’s really benefiting most from the growth curve of many of these companies that have tended to stay private longer, it’s all the private investors. And that is really tough.
Scott: Yeah, late stage, late stage, yeah.
Charly: Yeah, it’s really tough to get any of these deals. When you’re in the environment, you will get exposure as an angel investor, but it’s hard. So, what if you had a venue like this where it’s a little easier to say anybody who is an accredited investor, and even that, it’s plenty of things I think we should do to evolve the definition of that. But even with the current definition, how do you start to open it up so that more people have access to the private markets? Right now, if the company is okay with it, why not give them access? And just really democratizing access to private equity, which is really the underlying piece of it here. And the last thing I’d add, which has been a big driver for us, and frankly is a big driver in many of the discussions I have is, how does that change how you think about compensation for your employees? The discussion I have today with a new employee is very different because I’m like, “Yes, it’s private stock, but every quarter you’ll get to sell it as soon as you’re vested.” It’s a completely different discussion, versus, “Hey, you’ve got a four-year grant. I don’t know when it will be liquid, but hey, we’re really, really positive on the future.”
Scott: Yeah, well also you’re totally right, because I have some friends who just want to work for public companies because they can sell. And then I think the other thing that you’re touching on is, if you have vested some stock at a private company, you’re typically forced to exercise within three months or six months of leaving the company. And a lot of times, that’s a big dollar amount. So, it makes it kind of tough to come up with that kind of money. So the fact that you can get some liquidity to exercise the rest of your shares is pretty powerful. I always like solutions that make the pie bigger and easier for everybody else. And I think this is like a classic solution for that.
Charly: Yeah, no, we’re really, really hopeful that it can help a lot of folks around that.
Scott: Where are you in the rollout for CartaX? Because I saw the presentation and the announcement, but is it slowly rolling out, or how’s it going?
Charly: Yeah, so we’ve run our first transaction, as we always do. We were the first customer at our restaurant. So, we had the first meal of this new dish, and it was a great outcome for us, very happy with how that functioned. We took some feedback from that and kind of made some changes to the platform. And now we’re engaging with external companies on our platform already to run transaction. Nothing I can announce yet, but we’ve got a whole pipeline of companies we’re working with to get this going.
Scott: Awesome, that’s great. See, they kind of sucked you back into investment baking. You’re back in the making markets and all kind of stuff.
Charly: It’s very true. Yeah, we’ve got a bunch of investment bankers who are working in that part of the company and yeah, we’re having a lot of discussion, like, “How are we creating markets for this issue?” It’s interesting.
Scott: Yeah, that’s really cool. Well, this has been phenomenal. I really appreciate your time. Maybe you can tell everyone how to reach out if they want to work with Carta on the cap table, if they want to do CartaX, if they’re a fund. How do they reach out and start working with Carta?
Charly: Absolutely. Yeah, the best is just to go to our website, carta.com to get access to the different solutions that we have. One thing I’ll remind everybody of is, it’s not well-known yet, but we have, for early stage founders, we have a free product. It’s called Carta Launch, and it’s super important to us because we’re just trying to make it easy for people early on, just have the right solution to build their business and not worry about anything. So, it’s all the core cap table functionalities for companies I think that have raised less than a million and less than 25 employees. It’s all online, but strongly encourage everybody to check that out. And then we’ve got solutions for all the way to public. We support also more than 50 public companies on the platform. So, it’s really, we’ve got solutions across the board. And of course, if you’re interested in liquidity, check us out. And otherwise just charly@carta.com, and you can feel free to reach out to me directly as well.
Scott: Beautiful. And I forgot that we’ve actually done … We used to do Carter’s tax compliance way back in the day, probably right when you first started.
Charly: Yeah, exactly. That’s right. I remember deciding to use Kruze. It was phenomenally useful when we started, because I’m sure many other customers, we just didn’t have the expertise in-house to know how to deal with this. And you guys were so helpful helping us scale.
Scott: Thank you so much. Well, we’re very invested in your success. And like I said, for those out there, we really promote Carta. It just makes everyone’s life easier, including ours. It helps allow us to bring the accounting costs down for companies because it’s so, like you said, it’s so easy to access information, it’s right there. The CartaX is huge. This is like a huge benefit that you’re bringing to the whole startup ecosystem. So, I can’t wait to see it rolled out.
Charly: Yeah, we’re super excited. Thanks for having us on.
Scott: Awesome. All right, man. Well, thank you so much.
Charly: Yeah, thank you.
Scott: Take care, Charly.
Singer: (singing) When your troubles are mounting, in tax or accounting, you go to Kruze, Founders and Friends. It’s Kruze consulting. Founders and Friends with your host Scotty Orn.

Learn why Kruze Consulting is one of the leading accounting firms in San Francisco and Silicon Valley by serving funded, early-stage companies. Our clients have raised over $15 billion in venture capital and seed financing, and our research and development tax credit work has saved clients millions of dollars in burn rate and payroll taxes. Contact Kruze to learn more.

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